Chiquita Brands plans to close down its Puerto Armuelles Fruit Company (PAFCO) subsidiary, and has made the Panamanian government and unionized banana workers an offer it doesn't think they can refuse. The terms of the offer are that the Panamanian government pays the workers the severance pay that Chiquita owes them, the leases of Panamanian government land held by Chiquita get devolved to "independent cooperatives" that would work the farms, provided that the Panamanian government pays price supports to keep production going, and if and when the world banana market turns around Chiquita might buy fruit from these independent entities. Chiquita says that if the offer is not accepted by December 31, it will just close PAFCO and walk away from the Pacific side of Panama. (The Cincinnati-based banana company also maintains plantations in Bocas del Toro, which due mainly to environmental factors are more profitable than those in Chiriqui province.) At a December 156 special meeting SITRACHILCO, the union that represents the minority of PAFCO workers who have not already lost their jobs, decided to reject the company's ultimatum. Moreover, the Panamanian government has no money budget to comply with Chiquita's demands.

The Banking Superintendent has approved a new regulation that allows banks to set their own criteria of what's "suspicious" and close the accounts of natural or juridical persons on their own initiative, without court authorization. When a bank closes an account, it must notify the anti-laundering Financial Analysis Unit within 10 days, and inform the unit of the way in which the account holder received his, her, their or its funds from the closed account.

The Hamburg-based Dresdner Bank is laying off nearly one-third of its employees in Panama. In a major restructuring that's in line with the contraction of Panama's banking sector in general, Dresdner Bank Panama is eliminating all accounts with customers who are not involved in international commerce. The local branch of Germany's third-largest bank, Dresdner's core business here has been services to German companies operating in Latin America.

Panama Ports, the local subsidiary of Hong Kong-based Hutchison Whampoa, has paid the Panamanian government some $7 million of the $18.2 million in rent payments that it withheld earlier this year due to the Moscoso administration's failure to turn over buildings that Panama was contractually obligated to give to the company. After the dispute that led to the withholding and a Panama Ports slowdown in the development of the Port of Balboa's container-handling area, the government decreed an "equalization" plan that gave Hutchison Whampoa a tax and rent cut of more than $1 billion over the life of its concessions for the ports of Balboa and Cristobal. That massive giveaway, which has had a cascading effect as other companies have demanded and received comparable tax and rental discounts, was apparently insufficient to resolve the argument over the $18.2 million. "Equalization" provided a major impetus for the recent tax increase, but the adjustment was not enough to make up for the loss of revenues from the ports.

The UK-based Cable & Wireless phone company, in trouble all across the world, is maintaining its stranglehold on fixed telephone service in Panama despite the January 1 end of its legal monopoly and a mob of companies interested in competing in that sector. Several members of President Moscoso's cabinet sit on the Cable & Wireless Panama board of directors, and the Public Services Regulating Board (Ente Regulador) has issued a series of rulings that effectively prevent competition. Two key decisions are propping up the continuation of C&W's monopoly and high rates. First, a "contract" between C&W and Galaxy, a company whose CEO is a close relative of C&W's chief executive here, is being treated by the board as the benchmark for the interconnections rates that all other companies must pay. Galaxy will not be a realistic competitor, and primarily exists to ensure that no others enter the market. The Ente Regulador has also turned down BellSouth's petition to use its wireless network, now used for cellular service, to create a wireless fixed phone networks. Interpreting a provision in BellSouth's cell phone concession to exclude other uses, the board is requiring the company to use C&W's wires at rates that would make competition unprofitable. Cable & Wireless is losing several monopolies, and most of the 32 new companies getting into the telecommunications industries are only looking to fill small niches. Some companies want to provide fixed phone service in the Colon Free Zone, the Panama City banking district and some upscale neighborhoods in the capital, while many new companies are going into the national and international long-distance business. Only BellSouth and a few others want to fight C&W for the main part of their business, but so far they are being prevented from doing so.

A massive class action lawsuit by US stockholders alleging fraud is but one more footnote in the decline and fall of Cable & Wireless, the 120-year-old company that used to be one of the pillars of British colonialism. The company's plunge into the financial abyss came when it set aside £1.5 billion to cover possible legal expenses pursuant to a hold harmless provision in the sale of a cell phone subsidiary to Germany's Deutsche Telekom. Cable & Wireless says that it will probably not have to actually pay any such legal expenses, but the admission that it had not carried the expense on its books and annouced the potential liability to stockholders at the outset set share prices plunging to around half of their previous value and caused a shakeup in the firm's top management. In the United States, lawyers for shareholders who were harmed argue that inadequate disclosure amounts to fraud by way of concealment. Meanwhile, the Eastern Caribbean countries of St. Vicent-the Grenadines, Barbados, Trinidad-Tobago, Dominica, St. Lucia, and Antigua-Barbuda, along with Jamaica, have recently cancelled the fixed line phone monopoly that C&W had enjoyed in those countries. In another Caribbean setback, the Supreme Court of Jamaica has held that the interpretation of C&W's international long distance monopoly to bar Internet telephony is unconstitutional. That ruling, on a subject analogous to a case now pending before Panama's high court, may be appealed to the new Caribbean Court of Appeals.

Economy and Finance Minister Norberto Delgado can't show a specific check, but he says that money for scheduled increases in University of Panama employees was paid to the university and he wants the rector subjected to a criminal investigation about it. Because the Legislative Assembly rejected President Moscoso's 2002 national budget, the 2001 allocations remained in effect for 2002, and the 2002 increases were not contemplated in the 2001 budget. Meanwhile, university workers who are owed back pay remain on strike as the politicians posture and bicker, and all of this takes place against the backdrop of upcoming elections for university rector. The incumbent, Julio Vallarino, is a member of the PRD and the Arnulfista national administration appears to be contriving an argument that he diverted funds to other purposes and brought on the university's financial crisis. However, many strikers who have little use for the Arnulfistas also complain that Vallarino knew about the budget shortfall and failed to make the adjustments that the situation demanded.

The University of Panama Academic Council has approved a new wage and tenure scale for professors, one that's based almost entirely on seniority. Instead of three classes of professors (temporary, regular and permanent) there will be five, and the only way for someone to become a full professor will be to have taught at the University of Panama --- work at better institutions won't count --- for 25 years. Because the votes of professors in different categories are weighted differently in voting for rector and faculty deans, this change will affect university governance, probably to the effect of strengthening the PRD's grip on the rector's post and most university departments. The change may also affect the proliferation of private universities, which must be approved by the University of Panama.

Retail prices of gasoline went up between 11¢ and 12¢ per gallon, and diesel fuel went up 8¢, right after Christmas. The Venezuelan oil executives' anti-government lockout and expectations of a US-UK invasion of Iraq have affected world petroleum supplies and prices, and the higher prices have been passed on to consumers here. Liquid propane prices are also higher for the same reasons, except that the 25-gallon tanks that most Panamanians use for cooking are subject to price controls.

Petro Terminal de Panama, which owns the unused Puerto Armuelles to Chiriqui Grande oil pipeline, is cleaning and fixing the Pacific-Caribbean duct and plans to put it back into operation in 2003. Originally built when US law provided that Alaskan oil could not be exported, the pipeline lost its commercial use when the law changed and oil companies began to ship petroleum from Alaska's north shore to Japan and Korea instead of the US East Coast. Now, however, the pipeline has become a useful route for oil headed from Ecuador to the eastern United States and to Europe. Few modern petroleum tankers are small enough to fit through the Panama Canal, and the ease and relatively low cost of piping the liquid from ships on one side of the isthmus to ships or storage tanks on the other side make the pipeline a viable technology when there are markets and suppliers conveniently located.

Customers seemed to be out in greater numbers during the 2002 Christmas shopping season than they were in the same period of 2001, but according to most merchants people were bargain hunting and spent less than they did a year ago. Christmas discounts began early in December at many stores when the trend became apparent. Barbie dolls and Play Station game systems were the most popular items for those who were buying.

Engineering units from the US Army Reserve and National Guard will be arriving in Panama any day now, to begin work on rural roads, three school and three health clinics in the Ngobe-Bugle comarca in eastern Chiriqui province. Panama will get some $15 million worth of public works and American troops will get needed practice at building things in remote tropical areas. The exercises will teach more than just construction techniques, as they will also present participants with the practical problems of sanitation, logistics and survival implicit in such operations. There has only been scattered nationalistic criticism of the program, which will bring the largest influx of US military personnel into Panama since the American bases closed at the end of 1999.

Citing the Moscoso administration's and Legislative Assembly's general tendency to ignore labor concerns and specific actions in pushing through electoral and tax law changes for which there has been no public consensus, the National Confederation of Independent Union Unity (CONUSI), the nation's most powerful labor federation, has pulled out of the government's "national dialogues." CONUSI includes the militant SUNTRACS construction workers' union. Other labor groups may follow suit. The national dialogues that are underway include a series of discussions about changes in the Social Security system and another on measures to reactivate the national economy. Midway through 2002 the PRD pulled out of the national dialogues, citing concerns similar to those now expressed by organized labor.

It turns out that a bidless contract approved by President Moscoso's Cabinet Council has assigned the task of conducting an environmental impact study to determine whether a 15-kilometer road through the Volcan Baru cloud forest from Boquete to Cerro Punta to Constructora Urbana, SA --- which also has the contract to build the road. If it turns out that the environmentalists and local residents are right about how the road would destroy much of the ecosystem in Volcan Baru National Park, would the company that stands to profit from building such a road be likely to pass up that income by turning in an honest environmental impact statement? But have no fear. The Chiriqui director of the Minsitry of Public Works, Luis Fanovich, part of the extended Fanovich family that infests the Moscoso adminstration payroll, calls the road "ecotouristic." Opponents are unconvinced.

Citing unpaid arrears, IDAAN public water and sewer utility director Laurencio Guardia says that in 2003 the policy toward public schools, police stations and government ministries will harden to include shutoffs for unpaid water bills. Garcia says that the nation's total past-due water bill is some $50 million, about 10 percent of which is owed by state entities. This past year the shutoff of water to a public school in Panama Oeste led to a blockade of the Pan-American Highway by students, parents and teachers, and cutoffs of private homes and entire residential neighborhoods have led to a number of violent confrontations between affected persons and IDAAN employees.

Although international lenders and bond rating agencies have been hoping that Panama would reform its tax structure in order to bring in amounts closer to what the government spends, recent changes in the tax laws have failed to impress. Standard & Poors has kept Panama's bond risk rating where it was, at BB (stable), pointing out that the recent reforms do not alter the basic fiscal problem confronting the nation. Our bond risk rating is equivalent to those of Guatemala and Costa Rica, inferior to El Salvador's BB+ rating but slightly better than the Dominican Republic's BB-. Panama's failure to bring government income and spending in line with one another means that the government must pay higher interest on the money it borrows.

The Electoral Tribunal has selected 3M Panama, the local subsidiary of the Minnesota-based corporation, to produce the forms for its new cedulas. The contract is worth $2.3 million. 3M replaces UNISYS, which lost the job after a scandal in which cedula forms were diverted by company and Electoral Tribunal employees to Colombian gangters. The Electoral Tribunal has been running a spate of television commercials urging people to trust them, and says it will replace all cedulas that had been issued using the UNISYS form within nine months. UNISYS says it will sue to get the contract back.

Due to budget shortfalls, the Moscoso administration has cancelled its plans for a $21.5 million light rail urban transit system. The plan was for a train system with two lines running from Plaza Cinco de Mayo, one to San Ysidro and the other to Tocumen. Public Works Minister and presidential candidate Víctor Juliao says that if the Arnulfistas win the 2004 elections --- an unlikely prospect if current public opinion trends don't radically change --- the project will be revived.

The Interoceanic Regional Authority (ARI) has sold the Russian government 14,806 square meters in Albrook, at which a new embassy will be built. The Russian Federation has budgeted $1.184 million to build the new facility. Like the United States, Russia is looking to upgrade security at its embassies around the world in the face of threats by the likes of Osama bin Laden.

The lodge building in the Mi Pueblito Antillano section of Panama City's Los Pueblitos Park is now the home of the Centro de Estudios Afropanameños (CEDEAP). The center, which has existed for a decade, will carry on its historical research, publishing and cultural presentation functions from the building, which it is renting from the city.